Services PMI Hits New Record High, Equities Notch a Few New Records of Their Own, and the Chinese Debt Crisis Continues
November 4, 2021 | FIRESIDE CHARTS
Early in the pandemic, we talked a lot about how the services recovery was a little slow out of the gate when compared to manufacturing. Momentum is accelerating though, and October saw the ISM Services PMI climb to new record high—even if input price gains weren’t far behind. In addition to demonstrating sector strength, could this growth suggest some potential easing in supply chain pressures? Shipping costs are tumbling amid some long-awaited lower demand for vessels, but backlogs, delivery times, and costs remain at extremes. Meanwhile, as multiple indices climb to new record highs and the S&P 500® approaches both its 500th day without a dip below its 200-day moving average and its 1995 record for most new highs hit in a year, many analysts are growing nervous about valuations. How sustainable is this trajectory when technicals are looking increasingly stretched? Finally, the selloff in Chinese debt has continued, with many firms approaching the brink of default, and the impact is being felt on equities as well. How will accelerating covid outbreaks factor into the equation?
1. The U.S. had a solid month of growth in the services sector; this is encouraging given the size of the services sector in our economy. However, about 40% of the growth was due to supplier deliveries. Are the supply chain bottlenecks finally resolving themselves?
Source: The Daily Shot, from 11/4/21
2. Prices paid for these services resumed their ascent:
Source: The Daily Shot, from 11/4/21
3. The pandemic-led price spikes are starting to resolve themselves:
Source: The Daily Shot, from 11/3/21
4. The markets are approaching the late 1990’s P/E ratio:
Source: The Daily Shot, from 11/4/21
5. “To the moon, Alice!” does have its limits…the question is just how high can they go before a rest is needed?
Source: The Daily Shot, from 11/4/21
6. China’s real estate issues continue to widen and deepen. It is depressing their stock market as well:
Source: The Daily Shot, from 11/3/21
7. Just when the supply chain looks to be regaining its footing, Covid is now spreading again in much of China:
Source: National Health Commission, as of 11/3/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.